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Mentioned Companies: CPHD, MYGN, RHHBY, VCYT

The Veracyte Afirma Test: A Case Study for the Promise & Need of Molecular Diagnostics

by James Bannon, May 05, 2014
ARK-Invest_Blog-Banner_2014_05_04---Veracyte

Advancements in molecular diagnostics can prevent unnecessary surgical procedures, reducing healthcare costs and improving patients’ wellbeing.

In the United States, doctors perform approximately 25,000 unnecessary thyroid surgeries annually. Following the discovery of a lump in the throat, doctors typically recommend removal before receiving results of fine needle aspiration (FNA), isolating the risk of cancer. More often than not, FNA results for cancer are negative, leaving the patient with a long-term need for daily thyroid pills nonetheless.

Molecular diagnostic tests are the solution to this problem. Companies such as Veracyte [VCYT], Cepheid [CPHD], Myriad Genetics Inc. [BIIB], and Hoffman-La Roche [RHHBY] are among the leaders in molecular medicine.

In the place of surgery, Veracyte’s Afirma test genetically analyzes the tissue from the thyroid FNA and in a few hours determines with 95% accuracy if it is cancerous. As illustrated below, the lifetime costs associated with unnecessary surgery and a lifetime of thyroid medication are more than four times greater than the $4,275 cost of an Afirma test.

Afirma Cost, Afirma test

This inefficiency has a tremendous economic toll. In the US the lifetime cost, including post-surgery medication, incurred by people who undergo unnecessary thyroid surgeries each year is approximately $500 million. As shown below, it would cost approximately 20% of that amount to test all of these individuals to determine the need for surgery.

CostofThyroid, Afirma test

These large scale systemic wastes are not unique to thyroid nodules. As with thyroid cancer, FNA tests are used for many other cancers, including breast and prostate. Consequently, the size of the molecular diagnostics market is likely to be billions of dollars, perhaps tens of billions, potentially saving the healthcare system hundreds of billions of dollars in unnecessary surgeries and drugs.